Helping people with computers... one answer at a time.
You should install Windows Service Pack 2, but there are a few steps to take before you do.
Should I Install SP2? (Windows XP Service Pack 2)
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Yes, with caveats...
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This recent article: Will SP2 Crash my machine? includes a list of steps you should take before installing SP2, including checking for possible incompatibilities. Read that article first.
Article C2202 - October 10, 2004 « »